Cochlear (ASX:COH) Shares Rebound After Citi Upgrade, Forecasts Stronger Growth

Key Points:

• Cochlear's stock rose 1.5% to AU$291.92 after Citi upgraded the stock from "sell" to "neutral."
• Citi raised its price target to AU$305, citing expected revenue and profit growth, particularly in the Adults/Seniors market.
• Cochlear's FY24 profit increased by 27%, though FY25 profit forecasts missed market expectations, leading to a previous 13% decline in stock since mid-August.
• The stock is rated "hold" on average, with a median price target of AU$283.00.
• Cochlear shares have fallen about 2.4% year-to-date.

Shares of Cochlear Limited (ASX:COH), a leading hearing implant manufacturer, rose as much as 1.5% to AU$291.92 on Friday following an upgrade by Citi. The investment bank raised its rating on the stock from "sell" to "neutral" and increased its price target to AU$305 from AU$255. Citi’s analysts expressed optimism about Cochlear's future revenue and profit growth, particularly driven by continued expansion in the Adults/Seniors market.

In their note, Citi analysts stated that they expect Cochlear to maintain its growth trajectory in the coming years, pointing to double-digit growth potential in the Adults/Seniors segment. They also anticipate single-digit growth in the Children’s segment, which, while slower, still contributes to the company's overall performance. "We assume that COH can maintain 10% growth for longer," Citi analysts wrote, reinforcing their positive outlook for the hearing implant manufacturer.

Cochlear recently reported a 27% increase in profit for FY24, marking a significant achievement for the company. However, despite this strong performance, Cochlear's FY25 profit forecast fell short of market expectations. As a result, the company's stock had declined by around 13% since mid-August. Investors had reacted negatively to the underwhelming forecast, which put pressure on the stock, but Citi's recent upgrade has provided a much-needed boost.

Analysts across the board maintain a "hold" rating on Cochlear, according to data compiled by LSEG. The median price target is set at AU$283.00, slightly below Cochlear’s current trading levels. While the average rating reflects a cautious outlook, Citi's more optimistic stance indicates that there could be further upside potential for the stock.

Year-to-date, Cochlear's shares have fallen by approximately 2.4%. Despite the recent decline, the company's strong performance in the Adults/Seniors market offers hope for sustained long-term growth. Citi’s confidence in the company’s ability to maintain a 10% growth rate signals that Cochlear may continue to deliver strong financial results in the future, particularly as the aging population drives demand for hearing implants.

Cochlear's global leadership in hearing implants, coupled with its solid market positioning, makes it well-placed to capture growth in key demographics. The company's innovative product portfolio, which addresses a range of hearing loss needs, continues to be a vital driver of its success. With an increasing number of adults and seniors seeking hearing solutions, Cochlear's ability to cater to this expanding market is expected to remain a central pillar of its growth strategy.

Looking ahead, investors will be closely watching how Cochlear performs in the coming quarters, especially in light of the FY25 profit forecast miss. While the company has demonstrated resilience with a 27% profit jump in FY24, meeting or exceeding future profit expectations will be critical to sustaining investor confidence. Analysts and shareholders alike will also be monitoring broader market conditions and competitive dynamics within the hearing implant industry.